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A Two-Buck Chuck?

Will En Pointe Technologies get cheaper still?

With a stock price currently hovering in the vicinity of $2 and valuation metrics that fall below such competitors as CDW(NASDAQ:CDWC) and Office Depot(NYSE:ODP), En Pointe Technologies(NASDAQ:ENPT)ought to look quite attractive right now to investors of the cheapskate persuasion.

Indeed, given that shares of the company -- whose services allow customers to comparison-shop among distributors for products made by the likes of Apple Computer(NASDAQ:AAPL), IBM(NYSE:IBM), and Microsoft(NASDAQ:MSFT) -- are currently more than 40% below their 52-week high, one might expect true-blue value hounds to be licking their chops right about now.

Alas, it isn't so. Far from it, in fact. On Thursday, a day before the California-based small-cap was set to release its fourth-quarter and fiscal 2005 earnings, investors sent En Pointe's shares tumbling by 6.2%. Then, on the day of the announcement, the company lost another 2.5% of its value. All told, December has been a cruel month for En Pointe, whose stock has declined by more than 19%.

So what, exactly, is behind the falling fortunes here, particularly considering that En Pointe's announcement -- at first blush, anyway -- seems chock-full of good news? Quarterly net sales were up 22% compared with the year-ago period, after all, and for the entirety of fiscal 2005, that same metric rose by some 18%. Not too shabby, to say the least.

Trouble is, the company's good revenue news was accompanied by a weak earnings report. En Pointe booked just $145,000 in net income for all of fiscal 2005, a sum that nets out to earnings per share of $0.02 and compares most unfavorably with the $1.4 million -- or $0.20 per diluted share -- the company cranked out in fiscal 2004. Substantially increased operating expenses -- not to mention a strategy of competing on price to pump up revenue -- eroded En Pointe's bottom line, as did the company's 38% ownership stake in a money-losing start-up offshore outsourcing concern.

What a difference a year makes, in other words. Despite its apparently dirt-cheap stock price, value hounds in particular have ample reason to suspect that En Pointe has further yet to fall.